Recession forces states to rethink tourism funding

Like a business trying to sell a product, Washington state has for years attracted visitors by promoting stunning images of some of the nation's most majestic scenery — from the snowcapped peaks of the Cascades to the rainforests and thundering waterfalls of the Olympic Peninsula.

OLYMPIA, Wash. – Like a business trying to sell a product, Washington state has for years attracted visitors by promoting stunning images of some of the nation's most majestic scenery — from the snowcapped peaks of the Cascades to the rainforests and thundering waterfalls of the Olympic Peninsula.

That marketing is now coming to an abrupt end.

By the end of this week, Washington will close its official tourism agency and become the only state to cease all state funding for self-promotion. It's just one example of how states are coping with budget deficits brought on by slumping tax revenue.

"When you're taking kids off health care and raising tuition, you have to make some tough decisions," said Senate Republican Leader Mike Hewitt, who has for years sat on a commission that guides Washington's tourism strategy.

In May, the state Legislature eliminated the remaining funding for the tourism agency, about $2 million for the coming fiscal year. State support had been as high as $7 million in years past.

Not all states are following Washington's approach. Some view tourism as a key industry that will contribute to an economic rebound, one that is worthy of state support even in an era of declining revenue for other services.

Michigan, surrounded by the Great Lakes, is pouring millions of dollars into marketing campaigns, hoping for any advantage in the competition for the small amount of discretionary cash consumers are willing to spend on travel.

Even though Michigan has consistently had one of the nation's highest unemployment rates, it will spend about $25 million this year on marketing. That is five times the budget it had for self-promotion just six years ago. The state's tourism industry contributes a small amount.

Michigan is now in the middle of its largest national advertising buy — spending more than $11 million to splash its "Pure Michigan" message on cable. George Zimmermann, vice president for Travel Michigan, said research indicates that a dollar spent on out-of-state advertising returns $3.29 in tax money alone — and much more for businesses.

"It's a bit of a no-brainer," Zimmerman said. "Tourism is not the answer to restoring the Michigan economy, but we do believe it's one of the answers."

Some states have established public-private partnerships to share the cost of marketing.

California state government pays for just a fraction of a tourism budget that relies on assessments paid by hotels, restaurants, rental car companies and other tourism-related businesses. The annual budget for promoting travel to California is about $50 million, but only about $200,000 of that will come from the state in the fiscal year that begins July 1.

Marsha Massey, Washington state's departing tourism director, said her state should follow that model, allowing the industry to be responsible for its own promotions.

"It is going to be a positive for the state's tourism industry to really be in charge of their own destiny," Massey said. "The process of getting here to there is going to take a little time."

To fill the void, Washington's tourism industry has established a new promotional organization. It will take over some state assets — such as the tourism website — but is still trying to identify a way to fund a sustained marketing campaign.

The group has raised more than $300,000, said Kim Bennett, chief executive officer of the Vancouver Regional Tourism Office in southwest Washington. She would like to see a minimum of $15 million.

"We cannot continue to operate and be competitive with other states without appropriate funding," Bennett said. "Everyone who is selling a good or a service or a destination, you have to get out and market. Your competitors are out there marketing."

Visitors to Washington spent some $15.2 billion in 2010, according to state figures.

About half the states are shrinking their marketing budgets, while the other half plan to increase them, according to the U.S. Travel Association.

New York's spending is down 60 percent to $5.5 million, while Arizona is down 40 percent to $8 million. Even Hawaii, one of the world's leading tourism destinations, is trying to redirect tourism money to other uses.

Gov. Neil Abercrombie said this year that tax dollars spent on promoting tourism in the state were disproportionate to other needs. He vowed to spend more of that money on social programs, environmental protection and infrastructure improvements.

Marketing money comes from a 9.25 percent tax on Hawaii hotel rooms and other accommodations. The amount to be spent from that pot on tourism will be capped at $69 million for the next four fiscal years.

While that's still a healthy budget, the cap is projected to divert $7 million to other state priorities in the next fiscal year.

Alaska, Louisiana and Michigan had the largest increases in marketing dollars between this year and last, according to the travel association.

"What Washington has done puts that state on an island," said Geoff Freeman, executive vice president of the travel association. "No state at this point in time has been, with all due respect to Washington, as short-sighted as those leaders have been."

The only other state that comes close to rivaling Washington's cuts during the recession is Connecticut, which essentially eliminated its tourism budget for two years but maintained its staff. Connecticut is reversing itself, with a new budget for the next two fiscal years that proposes restoring $15 million to the program.

The state's tourism industry has been limping along and struggling to stay competitive, said Randy Fiveash, Connecticut's tourism division director.